SEATTLE — Washington’s new income tax on high earners has survived a repeal effort at the ballot box by a wide margin.

But the 9.9% tax on household incomes above $1 million still faces a high-profile legal battle with major implications for the state’s budget and tax policy.

The court fight, which hinges on whether the tax violates the state constitution, ramps up with a Feb. 5 hearing scheduled before a Klickitat County Superior Court judge. On Friday, several public-sector labor unions, progressive groups and others petitioned to join the case in defense of the tax.

Any ruling is likely to be appealed directly to the state Supreme Court, where supporters hope the “millionaires tax” can clear one final hurdle. So far it has won approval from the state House and Senate, Gov. Bob Ferguson and, this week, a majority of Washington voters.

“We have passed gate four of five,” said Senate Majority Leader Jamie Pedersen, a Seattle Democrat and one of the tax’s main legislative architects, at an election night party. “We don’t win unless we win all five.”

The stakes at this final gate are high, for both sides.

If upheld, the tax will bring in more than $3 billion a year from around 25,000 households, starting in 2029, according to state estimates. That’s new revenue supporters say will help close a state budget gap without cuts to education and social services.

A court victory also sets the stage to further revamp Washington’s tax system, which critics say leans too heavily on “regressive” revenue, like sales taxes, that disproportionately burden lower earners. Only eight other states do not tax individual wage and salary income.

If the high-earners tax is defeated in court, its opponents say it would help force the Democratic-controlled state Legislature to rein in spending after repeated budget gaps and tax increases in recent years.

Tax opponents also argue that, if the tax survives, it will cause high earners, employers and investors to flee for lower-tax states, putting Washington’s economy at risk.

The highest court’s “decision, one way or the other, will have far-reaching economic consequences statewide,” said Jessica Levin, an associate teaching professor at Seattle University School of Law and expert in state constitutional law.

Income vs. property

The April lawsuit was brought by 10 plaintiffs, including three married couples with household incomes in excess of $1 million, who argue that the tax clashes with a longstanding Supreme Court interpretation of the state constitution.

Four other plaintiffs are trade groups representing business owners who could pay the tax.

All claim the high-earners tax is illegal under a 1933 state Supreme Court decision, Culliton vs. Chase, that struck down a 1932 state income tax measure and which has effectively blocked income taxes in Washington ever since.

In Culliton, the highest court ruled that income was a form of property under the state constitution, which defines property as “everything, whether tangible or intangible, subject to ownership.”

That interpretation meant income is subject to the constitution’s strict limits on property taxes – limits the new high-earners tax violates in two ways, plaintiffs say.

First, property in the same class must be taxed at the same rate. But the high-earners tax is “graduated” – 9.9% for those who pay, 0% for everyone else.

Second, the 9.9% tax violates a constitutional provision that caps property tax at 1% of its value, plaintiffs say.

Since 1933, the state Supreme Court has relied on Culliton to strike down several business and personal income taxes. Voters have also rejected income tax ballot measures.

The new tax “clearly flies in the face of the constitution, of precedent and of voter will,” former Washington state Attorney General Rob McKenna, one of several high-profile attorneys representing the plaintiffs, said earlier this year.

The high-earners tax will be defended by the state attorney general’s office. The agency says the tax is constitutional and that it expects to prevail in court, but has said little about its legal strategy or its stance on Culliton.

Proponents of the tax, including the Washington Education Association, the Washington State Labor Council and the Statewide Poverty Action Network, who asked the court Friday for permission to intervene as defendants in the case, have been more explicit in their hopes.

They expect the new tax will be ruled unconstitutional in superior court, which is bound by existing state Supreme Court decisions.

But once the case reaches the state Supreme Court, the intervening parties will argue that Culliton was “wrongly decided” and “should be overruled,” according to Friday’s court filings.

Although it happens infrequently, the highest court can throw out its own previous rulings if those decisions are later found to be incorrect and harmful or if their legal underpinnings no longer hold.

Supporters of the high-earners tax point to criticism by legal experts who argue that the Culliton decision was flawed even in 1933 and is now far out of step with federal law and with law in most other states.

They also say Culliton has caused great harm by making Washington’s tax system, as Pedersen has put it, “one of the worst and most regressive in the entire country.”

Levin, with Seattle University, says the case has major implications for state tax policy. The highest court, she said, “could open the door to comprehensive tax reform or preserve the status quo.”

Which way the state Supreme Court goes is difficult to predict, legal experts say.

Plaintiffs’ attorneys say they’ll be able to show that Culliton remains a viable standard for the meaning of income – and one lawmakers can’t override without amending the state constitution.

They also argue that claims of harm caused by Culliton are overstated and based on outdated research.

But legal experts on both sides of the case think the high court will have little choice but to revisit the 93-year-old ruling.

For starters, when Democratic lawmakers wrote the high-earners tax legislation, they carefully and intentionally described it as a tax “imposed on the receipt of Washington taxable income.”

In previous Supreme Court cases, that receipt-of-income language has led the court to review and invalidate state income taxes under Culliton.

The careful wording is no accident. Tax supporters and opponents alike say the legislation was designed to force the court to directly address whether income is still property.

Jackson Maynard, a member of the plaintiffs’ legal team and executive director and counsel with the Citizen Action Defense Fund, said Democrats in the Legislature will get their wish and “have the high court review whether or not an income tax is constitutional.”

And when it does review the tax, advocates think the court will have two choices with potentially historic consequences. As Pedersen put it Tuesday: “Either income taxes are not property taxes, or the (new tax) is unconstitutional. There is no in-between.”

©2026 The Seattle Times. Visit seattletimes.com. Distributed by Tribune Content Agency, LLC.